Quick Links

Guidelines & Procedures

Revenue Recognition Policy Guidelines

I.
Purpose:

In support of the Revenue Recognition Policy this guideline relates to the appropriate accounting of revenue from various sources for restricted and unrestricted purposes in
accordance with the Restricted Fund Method of Accounting [Canadian Institute of
Chartered Accountants (CICA) Handbook (HB) 4410.57-.77].

The Revenue Recognition Policy addresses external revenue transactions between the University
of Saskatchewan and non-University entities (Note that Chart 2 entities as recorded in Unifi are
considered non-University entities.). Revenue transactions between University
entities (i.e. between colleges and units) should be recorded as internal cost
recoveries.

Three overarching issues will be addressed:

Identification of external revenue restrictions:

Whether the
revenue to be recorded is classified as restricted purpose or unrestricted
purpose.

Where to record revenue (fund
classification):

Whether the
revenue is recorded in a restricted or unrestricted fund.

When to record revenue:

When does
the University have the obligation to record the revenue?

II. Responsibilities:

Financial
Services Division is responsible for recording revenue and setting up accounts
receivable for grant and contract revenue transactions in the Student Financial
Aid, Research and Capital Restricted Funds.

Financial
Services Division is responsible for recording investment income and setting up
accounts receivable for any funds which are invested by the University either
self-managed or as part of the University investment pool.

Corporate
Administration is responsible for recording real estate income and setting up
accounts receivable for University properties under its administration.

Colleges
and units are responsible for recording revenue, setting up accounts receivable
and recording deferred revenue in the General Fund (see definition below) for
activity managed at the college or unit level.

III. Definitions:

Contract - a reciprocal agreement
between two or more parties creating enforceable obligations. The University of Saskatchewan requires that the agreement
be in writing, signed by the duly authorized University personnel in accordance
with the University Signing Authority Policy. Common features of most
contracts:

Contract
defines the scope and nature of the work;

Contract
establishes the term of the contract, the cash flows, reporting requirements
and duration;

Contract
details any obligations the University must fulfill before it is eligible to
access subsequent year's revenues;

Contract
specifies what is to happen to any unspent resources

Contract
often contains requirements for regular invoicing.

Contribution
-
a non-reciprocal transfer to a not-for-profit organization of cash or other
assets or a non-reciprocal settlement or cancellation of its liabilities. Government funding provided to a
not-for-profit organization is considered to be a contribution [CICA HB 4420.02
(b)]. Examples include grants, gifts and bequests but do not include sales of
services or product to government.

Contribution
Receivable - should be recognized as an asset when it
meets the following criteria:

The amount to be received can be reasonably estimated;
and

Ultimate collection
is reasonably assured. [CICA HB 4420.03]

For purposes of revenue recognition, contributions include
contributions receivable.

The
University has determined that one of the critical elements to meeting the
contribution receivable criteria is the existence of a formal agreement,
evidenced by signed documentation, regarding the contribution. Signed
documentation is evidence of both parties formal commitment to the specific
nature and terms of the agreed-upon arrangement.

Endowment
Contribution - is a type of restricted contribution subject to externally
imposed stipulations specifying that the resources contributed be maintained
permanently, although the constituent assets may change from time to time.

Endowment
Fund - a self-balancing set of accounts which report the
accumulation of endowment contributions. Only endowment contributions and
investment income subject to restrictions stipulating that it be added to the
principal amount of the endowment fund would be reported as revenue of the
endowment fund. Allocations of resources to the endowment fund that result from
the imposition of internal restrictions are recorded as interfund transfers. [CICA HB 4410.02 (e)(ii)]

Fund - a self
balancing set of accounts recording cash and other financial resources,
together with all related liabilities and residual equities or balances, and
changes therein, which are segregated for the purpose of carrying on specific
activities or attaining certain objectives in accordance with special
regulations, restrictions, or limitations.

General
Fund - a self-balancing set of accounts which reports all
unrestricted revenue and restricted contributions for which no corresponding
restricted fund is presented. The fund balance represents net assets that are
not subject to externally imposed restrictions. [CICA HB 4420.02 (e)(iii)]

For the University of Saskatchewan, the General Fund
encompasses all Operating Funds and Ancillary Funds.

Grant -
financial support for a particular subject area or field without formal
detailed stipulations. Consistent with characteristics identified in policies
and guidelines developed by Research Services, http://www.usask.ca/research/research_services/policies.php
, the following are often present in a grant:

Flexibility
exists to revise the course of the work as it proceeds without the approval of
the sponsor;

Payment of
the grant is not linked to the timeliness or contents of the results and is
usually paid in advance or through a series of advances;

No
restrictions are placed on the publication of results as they are intended for
public dissemination;

Sponsor
does not reserve to itself rights to the commercial exploitation of results;

Principal
Investigator or any co-investigator(s) cannot be compensated under the project.

Investment
Income - revenue arising from the use by others of University assets
including, but not exclusive to, the following categories:

Interest -
on a time proportion basis;

Royalties -
as they accrue, in accordance with the terms of the relevant agreement;

Dividends -
when the shareholder's right to receive payment is established;

Realized
gains and losses - in the period in
which they occur;

Unrealized
gains and losses - in the period in
which they occur, as GAAP applicable.

Investment
income will be considered to be restricted or unrestricted based on the restrictions
imposed on the resources originally contributed.

Real Estate
Income - income generated from real estate, such as lease or rent
payments

Restricted
Contribution - a contribution subject to externally imposed stipulations
that specify the purpose for which the contributed asset is to be used. A
contribution restricted for the purchase of a capital asset or a contribution
of the capital asset itself is a type of restricted contribution. [CICA
HB 4410.02(b)(i)]

Restricted
Fund - a self-balancing set of accounts the elements of which are
restricted or relate to the use of restricted resources. Only restricted
contributions, other than endowment contributions, and other externally
restricted revenue would be reported as revenue in a restricted fund.
Allocations of resources that result from the imposition of internal
restrictions are recorded as interfund transfers to the restricted fund. [CICA
HB 4420.02 (e)(i)].

The University of Saskatchewan utilizes three types of
restricted funds: Student Financial Aid, Research and Capital.

Sale of
Services or Products - any sale of a good or service to parties external to the
University.

Student
Fees - tuition and fees as defined in University Policy 4.33 "Tuition
and Fees Authorization".

Unrestricted
Revenue - neither restricted nor endowed; available for general
use

IV. Major Sources of Revenue and Normal Categorization:

Revenue

Restricted

Unrestricted

Student fees

x

Sales of services and products

x

Grants

x

Contracts

x

x

Gifts and bequests (including
gift-in-kind)

x

x

Income from investments

x

x

Real estate income

x

x

Miscellaneous income

x

x

The
three overarching issues discussed in the "Purpose" section should be addressed
as follows:

A. Identification of Type of Revenue:

Student
fees and the sale of services and products are always considered unrestricted
forms of revenue.

Grants are
always considered restricted contributions since by definition they are
financial support for a particular subject area or field.

Contracts
may be for unrestricted purposes or for restricted purposes (e.g. where
external third parties attach stipulations as to how contractual funds may be
spent).

Gifts and
bequests may be received as unrestricted contributions or restricted
contributions (i.e. where external third parties attach stipulations as to
their use).

Income from
investments and real estate income may be unrestricted or restricted revenue,
based on the original investment and any external restrictions.

Miscellaneous
income may be unrestricted or restricted revenue, based on the source of income
and any external restrictions.

B. Where to Record Revenue (Fund Classification):

Student
fees and the sale of services and products, always considered unrestricted
forms of revenue, are recorded in the General Fund.

Grants
received as restricted contributions for Student Financial Aid, Research or
Capital purposes, are recorded in the applicable restricted fund.

Grants
received as restricted contributions where there is no specific restricted fund
are recorded in the General Fund. This
revenue must then be deferred and recognized as applicable matching expenses
are recorded.

Unrestricted
contract revenue is recorded in the General Fund.

Contract
revenue restricted for Student Financial Aid, Research or Capital purposes is
recorded in the applicable restricted fund.

Contract
revenue restricted for purposes where there is no specific restricted fund is
recorded in the General Fund.

Gifts and
bequests, received as unrestricted contributions, are recorded in the General
Fund.

Gifts and
bequests, received as restricted contributions for Student Financial Aid,
Research or Capital purposes, are recorded in the applicable restricted fund.

Gifts and
bequests received as restricted contributions where there is no specific
restricted fund are recorded in the General Fund. This revenue must then be deferred and
recognized as applicable matching expenses are recorded.

Income from
investments and real estate income are recorded in a restricted fund or
unrestricted fund based on the terms mandated by the original grant, contract,
gift or bequest.

Miscellaneous
income from unrestricted sources is recorded in the General Fund.

Miscellaneous
income for Student Financial Aid, Research or Capital purposes is recorded in
the applicable restricted fund.

Miscellaneous
income received with restrictions where there is no specific restricted fund is
recorded in the General Fund. This
revenue must then be deferred and recognized as applicable matching expenses
are recorded.

Endowment
contributions are recorded in the Endowment (restricted) Fund

Application:

[See "Decision Tree Illustration for Organizations" below]:

CICA HB 4410.80 Decision Tree Illustration for Organizations, such as the University of
Saskatchewan, using the Restricted Fund Method:

record as revenue when product sold or service
provided (set up accounts receivable, if payment not received)

defer
deposits on sale until transfer of risks and rewards of ownership

3400.06 -.08

Contracts

record revenue as the service or contract
activity is performed

ensure
enforceable obligations have been met

3400.13-.15

Gifts and Bequests

(including gift-in-kind)

record
as revenue in period funds received or receivable

pledges
are not recorded until received

4410.68

Income from Investments

record as revenue when reasonable assurance
exists regarding measurement and collectability

3400.09

4410.49 -.51

Real Estate Income

record as revenue in period funds earned (set
up accounts receivable, if not received)

3065

Miscellaneous Income

record as revenue in period funds earned (set
up accounts receivable, if not received)

1000.47

Student
Fees (Unrestricted):

Student
fees are recorded as revenue in the General Fund in the time period in which
the course or seminar occurs.

If student fees are received prior to when the course
or seminar occurs, this revenue must be deferred as a liability (deferred
revenue) until earned.

If the course or seminar overlaps fiscal periods,
revenue must be prorated between periods. For example, if a course ran from
January to June of a calendar year, at April 30 (the University's year-end),
record 4/6th of the revenue generated from student fees and defer
2/6th of the revenue generated from student fees.

Sales of Services and Products(Unrestricted):

Sales of
services and products are recorded as revenue in the General Fund at the time
the product is sold or the service is provided.

If payment
is not received at the time the product is sold or the service is provided, an
account receivable should be set up in UniFi for the sale of product or service
that took place.

Deposits on
future sales are recorded as deferred revenue (a liability) and would be
applied against the total of the good or service at the time the sale is
recorded (i.e. at the time the seller
transfers the risks and rewards of ownership to the buyer).

Contracts (Unrestricted):

Unrestricted
contracts are recorded as revenue in the General Fund as the service or contract
activity is performed, provided that at the time of performance ultimate
collection is reasonably assured. If payment is not simultaneously received,
revenue should still be recorded and a corresponding accounts receivable set up
in the period that the service or contract activity is performed. Gifts and
Bequests(Unrestricted):

Gifts & Bequests (Unrestricted):

Unrestricted
gifts and bequests are recorded as revenue in the General Fund in the period
received or receivable, if ultimate collection if reasonably assured.

Due to
uncertainty surrounding ultimate collection, accounts receivable are not
recorded for pledged gifts and bequests.

Investment
Income(Unrestricted):

Unrestricted
investment income is recorded as revenue in the General Fund when reasonable assurance
exists regarding measurement and collectability.

Real Estate
Income(Unrestricted):

Unrestricted
real estate income is recorded as revenue in the General Fund in the period
earned.

Real estate
income earned but not received is accrued in the General Fund.

Miscellaneous
Income(Unrestricted):

Unrestricted
miscellaneous income is recorded as revenue in the General Fund in the period
earned.

Miscellaneous
income earned but not received is accrued in the General Fund.

record as revenue in period funds earned (set up
accounts receivable, if not received)

4410.57

Miscellaneous income, without
a corresponding restricted fund

record as revenue in period funds earned (set up
accounts receivable, if not received)

defer
revenue if for specific expenses that have not yet been incurred

4410.57

Grants (Corresponding Restricted Fund):

Restricted
grants are recorded as revenue in the corresponding restricted fund if we have
documentation (i.e. signed agreement has been received) which allows the amount
to be reasonably estimated and if ultimate collection is reasonably assured. If payment is not received, revenue should
still be recorded and a corresponding account receivable set up when the
documentation is received.

Grants (No
Corresponding Restricted Fund):

Restricted
grants with no corresponding restricted fund are recorded as revenue in the
General Fund when a signed agreement has been received which allows the amount
to be reasonably estimated and if ultimate collection is reasonably
assured. If payment is not received,
revenue should still be recorded and a corresponding account receivable set up
when the documentation is received.

If the
grant or contract is restricted for expenditures of one of more future periods,
it is deferred and recorded as revenue in the same period or periods as the
related expenses are recorded.

Note: Grants may be annual or multi-year agreements. Multi-year
agreements generally fall in one of two categories:

Agreements where each subsequent year's funding is subject
to an approval process, such as appropriation in Parliament:

In this
instance, the first year's funding is recorded as revenue in the appropriate
fund when documentation (e.g. signed agreement or award letter) is received
which allows the amount to be reasonably estimated and if ultimate collection
is reasonably assured. One subsequent year's funding is recorded as revenue
(set up as accounts receivable, if payment has not been received) on the
anniversary date as most funding agencies recognize and approve annual cash
flows for liabilities. For example, assume a 5 year agreement for $100,000
began January 1, with $20,000 to be received on signing and $20,000 on each
subsequent anniversary date. On receipt of the signed agreement, Year 1,
$20,000 would be recorded as revenue (if the funding did not accompany the
signed agreement, an accounts receivable would be set up). At January 1, Year 2
another $20,000 is recorded, debiting accounts receivable and crediting revenue
for the subsequent year's funding that will be received in the upcoming fiscal
year, because the amount to be received can be reasonably estimated and
assuming ultimate collection is reasonably assured.

Agreements where each subsequent year's funding is NOT subject to an annual approval
process:

When
agreements are not subject to an annual approval process, the entire value of
the agreement will be recorded as revenue when documentation (e.g. signed
agreement or award letter) is received if reasonable assurance exists as to ultimate
collectability.

Contracts
(Corresponding Restricted Fund):

Restricted
contracts are recorded as revenue in the corresponding restricted fund as the
service or contract activity is performed, provided that at the time of
performance ultimate collection is reasonably assured. If payment is not simultaneously received,
revenue should still be recorded and a corresponding account receivable set up.

Contracts
(No Corresponding Restricted Fund):

Restricted
contracts with no corresponding restricted fund are recorded as revenue in the
General Fund as the service or contract activity is performed, provided that at
the time of performance ultimate collection is reasonably assured. If payment is not simultaneously received,
revenue should still be recorded and a corresponding account receivable set up.

Gifts and
Bequests(Corresponding Restricted Fund):

Restricted
gifts and bequests are recorded as revenue in the corresponding restricted fund
when received or receivable, if ultimate collection is reasonably assured.

Due to
uncertainty surrounding ultimate collection, accounts receivable are not
recorded for pledged gifts and bequests.

Gifts and
Bequests(No Corresponding Restricted Fund):

Restricted
gifts and bequests with no corresponding restricted fund are recorded as
revenue in the General Fund when received or receivable, if ultimate collection
if reasonably assured.

If the gift
or bequest is restricted for expenditures of one of more future periods, it is
deferred and recorded as revenue in the same period or periods as the related
expenses are recorded.

Due to
uncertainty surrounding ultimate collection, accounts receivable are not
recorded for pledged gifts and bequests.

Investment
Income(Corresponding Restricted Fund):

Investment
income on restricted funds is recorded as revenue of the appropriate fund, as
restrictions mandate, when reasonable assurance exits regarding measurement and
collectability.

Investment
Income(No Corresponding Restricted Fund):

Investment
income earned on contributions restricted for purposes other than one of the
established Restricted Fund types is recorded in the General Fund when
reasonable assurance exits regarding measurement and collectability.

If the
investment income is restricted for expenditures of one of more future periods,
it is deferred and recorded as revenue in the same period or periods as the
related expenses are recorded.

Real Estate Income(Corresponding Restricted Fund):

Real estate
income on restricted funds is recorded as revenue of the appropriate fund in
the period earned, as restrictions mandate.

Real estate
income earned but not received is accrued in the appropriate fund as
restrictions mandate.

Real Estate Income(No Corresponding Restricted Fund):

Real estate
income earned but not received is accrued in the appropriate fund as
restrictions mandate.

If the real
estate income is restricted for expenditures of one of more future p

Real estate
income on funds restricted for purposes other than one of the established Restricted
Fund types is recorded in the General Fund in the period earned.

eriods, it
is deferred and recorded as revenue in the same period or periods as the
related expenses are recorded.

Miscellaneous
Income(Corresponding Restricted Fund):

Miscellaneous
income on restricted funds is recorded as revenue of the appropriate fund in
the period earned, as restrictions mandate.

Miscellaneous
income earned but not received is accrued in the appropriate fund as
restrictions mandate.

Miscellaneous Income (No Corresponding Restricted Fund):

Miscellaneous
income on funds restricted for purposes other than one of the established
Restricted Fund types is recorded in the General Fund in the period
earned.

Miscellaneous
income earned but not received is accrued in the appropriate fund as restrictions
mandate.

If the
miscellaneous income is restricted for expenditures of one of more future
periods, it is deferred and recorded as revenue in the same period or periods
as the related expenses are recorded.